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    Chapter7 Problemsonnotesreceivable

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    yara sulieman
    - James Garfield Corp. sold merchandise to Warren Harding Co. and recorded various receivable transactions including factoring and pledging accounts receivable as collateral for loans. - It factored $9,000 of accounts receivable at a 9% financing charge and pledged $9,000 of specific accounts receivable to secure a $6,000 loan at a 6% interest rate. - Warren Harding Co. later declared bankruptcy and would only pay 10% of its account, so Garfield had to write off the uncollectible balance.

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    Chapter7 Problemsonnotesreceivable

    Uploaded by

    yara sulieman
    299 views21 pages
    - James Garfield Corp. sold merchandise to Warren Harding Co. and recorded various receivable transactions including factoring and pledging accounts receivable as collateral for loans. - It factored $9,000 of accounts receivable at a 9% financing charge and pledged $9,000 of specific accounts receivable to secure a $6,000 loan at a 6% interest rate. - Warren Harding Co. later declared bankruptcy and would only pay 10% of its account, so Garfield had to write off the uncollectible balance.

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    chapter7-problemsonNotesreceivable

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    - James Garfield Corp. sold merchandise to Warren Harding Co. and recorded various receivable transactions including factoring and pledging accounts receivable as collateral for loans. - It factored $9,000 of accounts receivable at a 9% financing charge and pledged $9,000 of specific accounts receivable to secure a $6,000 loan at a 6% interest rate. - Warren Harding Co. later declared bankruptcy and would only pay 10% of its account, so Garfield had to write off the uncollectible balance.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    299 views21 pages

    Chapter7 Problemsonnotesreceivable

    Uploaded by

    yara sulieman
    - James Garfield Corp. sold merchandise to Warren Harding Co. and recorded various receivable transactions including factoring and pledging accounts receivable as collateral for loans. - It factored $9,000 of accounts receivable at a 9% financing charge and pledged $9,000 of specific accounts receivable to secure a $6,000 loan at a 6% interest rate. - Warren Harding Co. later declared bankruptcy and would only pay 10% of its account, so Garfield had to write off the uncollectible balance.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    of 21

    E7-12 (Journalizing Various Receivable Transactions) Presented below is info

    July 1 James Garfield Corp. sold to Warren Harding Co. merchandise having a
    July 5 Accounts receivable of $9,000 (gross) are factored with Andrew Jackson
    July 9 Specific accounts receivable of $9,000 (gross) are pledged to Alf Landon
    Dec. 29 Warren Harding Co. notifies Garfield that it is bankrupt and will pay o

    Instructions Prepare all necessary entries in general journal form for Garfield

    Solution
    Debit
    1-Jul Accounys receivable 7840
    sales revenue

    5-Jul Cash 8190


    Loss on sale of receivables 810
    accounts receivable

    9-Jul Cash 5640


    Interest expense 360
    Note payable

    11-Jul Accounts receivable 160


    Sales discount fortfieted

    29-Dec Alloawance for doubtful accounts 7200


    Accounts receivable
    Presented below is information related to James Garfield Corp., which sells merchan
    Co. merchandise having a sales price of $8,000.
    red with Andrew Jackson Credit Corp. without recourse at a financing charge of 9%.
    are pledged to Alf Landon Credit Corp. as security for a loan of $6,000 at a finance cha
    s bankrupt and will pay only 10% of its account. Give the entry to write off the uncoll

    journal form for Garfield Corp.

    Credit

    7840

    9000

    6000

    160

    7200
    ., which sells merchandise with terms 2/10, net 60. Garfield records its sales and rece

    ancing charge of 9%. Cash is received for the proceeds; collections are handled by th
    6,000 at a finance charge of 6% of the amount of the loan. The finance company will
    to write off the uncollectible balance using the allowance method. (Note: First record
    s sales and receivables net.

    e handled by the finance company. (These accounts were all past the discount period
    e company will make the collections. (All the accounts receivable are past the discou
    ote: First record the increase in the receivable on July 11 when the discount period p
    discount period.)
    past the discount period.)
    count period passed.)
    E7-13 (Note Transactions at Unrealistic Interest Rates) On July 1, 2017
    1. It sold land having a fair value of $700,000 in exchange for a 4-year
    2. It rendered services in exchange for a 3%, 8-year promissory note h
    for money that it borrowed from British National Bank. The customer
    Instructions Record the two journal entries that should be recorded b

    Solution

    1- Notes receivable 1,101,460


    Land 590,000
    Gain on sale of land 110,000
    Discount on Notes receivable 401,460

    2- Notes receivable 400,000


    Service revenue 221,163.68
    Discount on notes receivable 178,836.3
    s) On July 1, 2017, Agincourt Inc. made two sales.
    ange for a 4-year zero-interest-bearing promissory note in the face amount
    promissory note having a face value of $400,000 (interest payable annually).
    nk. The customers in these two transactions have credit ratings that require
    uld be recorded by Agincourt Inc. for the sales transactions above that took p

    Pv1 161552
    Pv2 59611.68
    PV 221163.68
    face amount of $1,101,460. The land is carried on Agincourt’s books at a co
    ble annually). Agincourt Inc. recently had to pay 8% interest
    s that require them to borrow money at 12% interest.
    ve that took place on July 1, 2017
    books at a cost of $590,000.
    E7-15 (Assigning Accounts Receivable) On April 1, 2017, Rasheed Com
    as collateral for a $200,000 loan due July 1, 2017. The assignment agr
    Third National Bank assesses a finance charge of 2% of the accounts r
    (a) Prepare the April 1, 2017, journal entry for Rasheed Company.
    (b) Prepare the journal entry for Rasheed’s collection of $350,000 of
    (c) On July 1, 2017, Rasheed paid Third National all that was due from

    Solution

    April 1-2017 Cash 192,000


    Interest expense 8,000
    Notes payable

    April 1- June 30 Cash 350,000


    Accounts receivable

    July 1- 2017 Notes payable 200,000


    Interest expense 5,000
    Cash
    l 1, 2017, Rasheed Company assigns $400,000 of its accounts receivable to th
    17. The assignment agreement calls for Rasheed to continue to collect the re
    of 2% of the accounts receivable, and interest on the loan is 10% (a realistic r
    Rasheed Company.
    ection of $350,000 of the accounts receivable during the period from April 1
    l all that was due from the loan it secured on April 1, 2017. Prepare the journ

    es payable 200,000

    ounts receivable 350,000

    205,000
    receivable to the Third National Bank
    to collect the receivables.
    0% (a realistic rate of interest for a note of this type)

    iod from April 1, 2017, through June 30, 2017.


    repare the journal entry to record this payment.
    E7-18(Transfer of Receivables with Recourse) Beyoncé Corporation fa
    Kathleen Battle Financing will collect the receivables. The receivables
    Kathleen Battle Financing assesses a finance charge of 2% of the amou
    . Instructions
    (a) What conditions must be met for a transfer of receivables with rec
    (b) Assume the conditions from part (a) are met. Prepare the journal e

    Solution

    A To be recorded as a sale, all of the following condition

    The transferred asset has been isolate


    The transferees have obtained the righ
    The transferor does not maintain effec

    B
    August 15-2017 Cash
    Company books Loss on sale of receivables
    Due from Factor

    Accounts Receivable
    Recourse liability

    Financing Company Accounts receivable


    Due to customer
    Interest Revenue
    Cash
    Corporation factors $175,000 of accounts receivable with Kathleen Battle Fin
    he receivables records are transferred to Kathleen Battle Financing on Augus
    % of the amount of accounts receivable and also reserves an amount equal

    vables with recourse to be accounted for as a sale?


    e the journal entry on August 15, 2017, for Beyoncé to record the sale of rec

    ng conditions would be met:

    been isolated from the transferor (put beyond reach of the transf
    ined the right to pledge or to exchange either the transferred ass
    aintain effective control over the transferred assets through an a

    164500
    5500
    7000

    175000
    2000

    175000
    7000
    3500
    164500
    een Battle Financing, Inc. on a with recourse basis.
    cing on August 15, 2017.
    mount equal to 4% of accounts receivable to cover probable adjustments

    the sale of receivables, assuming the recourse obligation has a fair value of $

    of the transferor and its creditors).


    sferred assets or beneficial interests in the trans-ferred assets.
    hrough an agreement to repurchase or redeem them before their m
    djustments

    fair value of $2,000.

    ed assets.
    efore their maturity.
    E7-19 (Transfer of Receivables without Recourse) JFK Corp. factors $3
    The receivables records are transferred to LBJ Finance, which will rece
    and retains an amount equal to 4% of accounts receivable to cover sa
    Instructions
    (a) Prepare the journal entry on July 1, 2017, for JFK Corp. to record th
    (b) Prepare the journal entry on July 1, 2017, for LBJ Finance Corporati

    Solution

    A Cash 283500
    Loss on sale of receivables 4500
    Due from factor 12000

    Accounts receivable

    B Accounts receivable 300000

    Due to customer
    Interest revenue
    Cash
    FK Corp. factors $300,000 of accounts receivable with LBJ Finance Corporati
    nce, which will receive the collections. LBJ Finance assesses a finance charge
    ceivable to cover sales discounts, returns, and allowances. The transaction is

    K Corp. to record the sale of receivables without recourse.


    BJ Finance Corporation to record the purchase of receivables without recour

    16500
    4500

    300000

    12000
    4500
    283500
    ance Corporation on a without recourse basis on July 1, 2017.
    finance charge of 1½% of the amount of accounts receivable
    e transaction is to be recorded as a sale.

    without recourse.

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